Federal Election – ALP’s Franking Credit Policy

Many of our self-funded retiree clients have been asking whether the ALP’s franking credit policy will have a negative impact on their retirement savings. The answer to this is that if you have been receiving a refund of franking credits, either from your personal tax return or from your SMSF return, then the ALP’s franking credit refund policy is likely to have a negative impact on your retirement savings.

If you are not already aware, franking credit refunds will continue to flow to members of large retail superannuation funds and industry funds.

As your accountants and financial advisers, we wish to reassure you that we have developed strategies that will minimise this negative impact. These include:

1. Reduce Australian Shares and Invest more into Property and Overseas Shares

If the franking credits from Australian shares are not being fully refunded, investors may be better off reducing Australian share dividends and franking credits in exchange for property income or dividends and capital gains from overseas shares. This will require an analysis of the portfolio and recommendations in respect of the asset allocation and investment selection to achieve the desired outcome.

2. Establish a Personal Superannuation Account

As stated above the proposed franking credit changes will not impact retail funds and industry funds. Members with SMSFs may consider transferring all or part of their portfolio to a retail or industry fund to the extent that their franking credit refund is maintained in that other fund. This will require an analysis of the portfolio to confirm what investments need to be sold and then rolled over as well as asset allocation and investment selection in the new fund.

3. Consolidating all Superannuation Accounts 

Some retirees may have two superannuation accounts, such as an SMSF in pension phase and a retail fund or industry superannuation fund in accumulation phase.

With the proposed franking credit changes, the SMSF will lose the excess franking credit and the industry superannuation account will continue to pay tax on its earnings. However, if the industry super accumulation balance is transferred to the SMSF, the SMSF will be able to utilise the excess franking credits to offset against the earnings from the accumulation balance.

4. Introducing New Accumulation Member(s)

SMSFs are allowed to have a maximum of four members, so if there are only two pension members, they may wish to introduce one or two new members, say their adult children, who are working and receiving employer contributions.

The fund can apply the non-refundable excess franking credits against the concessional contribution tax and also the tax on earnings by the accumulation members.

In the event that there is a change of government we will be providing seminars in relation to the proposed law changes and confirming what strategy will be best to protect you from losses that may arise from this change in policy.

In the meantime, please contact our superannuation and wealth management team on (03) 9810 0700 or advice@bgprivateclients.com.au if you have any questions.

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Talk to us…

This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.

All services are provided as a Corporate Authorised Representative of BG Wealth Management Pty Ltd, ABN 14 127 520 558, AFSL 496348.

Count_WEB

Financial Planning Services provided as an authorised representative of Count Financial Limited ABN 19 001 974 625 Australian Financial Services Licence Holder Number 227232 a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Count is a Professional Partner of the Financial Planning Association of Australia Limited. Count advisers are authorised representatives of Count. www.count.com.au

"Please note that any taxation and accounting services are not endorsed nor the responsibility of Count Financial Limited".